European markets end lower

A stronger euro following positive eurozone growth figures helped undermine European markets, while Wall Street fell back on concerns about the Republican’s tax plans and the prospect of rising interest rates.

In the UK, the FTSE 100 outperformed other major indices, despite a fall in mining companies as commodity prices lost ground on weak Chinese data. The UK index was helped by positive performances from Vodafone following its results and Tesco after its takeover of Booker was cleared by competition authorities. The final scores showed:

The FTSE 100 finished down 0.01% at 7414.42

Germany’s Dax dropped 0.31% to 13,033.48

France’s Cac closed 0.49% lower at 5315.58

Italy’s FTSE MIB fell 0.63% to 22,297.08

Spain’s Ibex ended down 0.59% at 9990.4

But in Greece, the Athens market added 0.38% to 720.18

On Wall Street, the Dow Jones Industrial Average is currently 72 points or 0.3% lower.

On that note it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

In a speech to the Oxford Economics Society one of them, Sir Jon Cunliffe, has been explaining his reasoning. His decision came because of uncertainty around the relationship between pay and unemployment, which is an important guide to domestic inflationary pressures. He said:

Given the uncertainties … and the serial disappointments we have had in recent years in forecasting the impact of unemployment on pay growth, there is, in my view, a not immaterial risk that the trade-off is not as it currently appears and that domestic inflation pressure will undershoot the Committee’s collective expectation.

In my view, the low level of domestic pressure on inflation now, the absence of second round effects from the depreciation of sterling, and inflation expectations around their historical averages, make it possible to wait before tightening policy until there is clear evidence that pay growth is responding to the level of unemployment in line with our forecast.

He said that the apparent disappearance of the link between pay and unemployment was one of the key puzzles of the post recovery economy in the UK and in advanced economies. He said:

Some of the relationships between economic variables that we depended on in the past appear to have gone on a longish leave of absence, but we are not sure why, or whether this is a temporary or more persistent departure.

Against that background – and although it makes forward-looking monetary policy more difficult – I tend to put more weight on the evidence we can or cannot see in the data, and a little less on the un-observables and on how we think the economy works.

He also emphasised that his decision did not anticipate any particular Brexit outcome:

We can, in my view, only work on what we see in the economy now, and stand ready to respond as necessary as Brexit emerges.

Over in Greece prime minister Alexis Tsipras has taken many by surprise with an announcement that his government will distribute €1.4bn worth of welfare handworks to citizens worst hit by cuts in the coming weeks. Helena Smith reports from Athens:

Attempting to repeat his politically adroit gesture of handing out pre-Christmas ‘gifts’ last year, the leftist leader said the Greek economy had done so well his government had decided to distribute € 1.4bn from the primary surplus it had posted in 2017.

In a televised address that took many by surprise, Tsipras said the government had decided to more than double the amount it would distribute in the form of a one-off “social dividend” in December.

Among those entitled to the handout would be citizens worst hit by austerity, including low-income pensioners and unemployed.

“We are in the very pleasant position of being better prepared and more organised to offer an even bigger amount … to the people who need it most,” he said.

Tsipras. Photograph: Costas Baltas/Reuters

Because the debt-stricken country had beaten fiscal bailout targets mandated by international creditors keeping it afloat, €720m of the primary surplus would go towards buttressing households earning less than €18,000 annually, the equivalent of around 3.4 million people, he said.

Another €360m would be given to Greece’s public power corporation to protect poorer consumers from tariff increases while €315m would alleviate “unfair” health insurance payments previously incurred by pensioners.

The leftist-led coalition is hoping to make a “clean exit” from international supervision when its third EU-IMF funded bailout officially expires next summer.

But critics today were quick to accuse Tsipras of dangerous populism with the main opposition New Democracy party saying the measures were the price of over-taxation that had otherwise killed the economy and as such were tantamount to taking from Peter to give to Paul.

Stock markets are under pressure at the moment, with worries about the Trump tax plans, a stronger euro and declines in commodities combining to send shares lower. Connor Campbell, financial analyst at Spreadex, said:

The euro seemed to be the only real winner this Tuesday, with the currency managing a robust rise as seemingly everything else fell.

The Dow Jones joined in with the wider decline after the bell. The US index dropped nearly 150 points, hitting a fortnightly low as it struggles to keep its head above 23300 due to doubts about Donald Trump’s tax plan.

One of the main drivers of UK trading this Tuesday was the commodity sector. Brent Crude fell 1.1% on increased output in the US, while copper plunged 2% as China’s manufacturing production slipped from 6.6% to a worse than forecast 6.2% month-on-month. This all sparked a 2.5%-3% dive from the likes of Rio Tinto, Anglo American and BHP Billiton, with BP also falling 0.7%, preventing the FTSE – which is down 0.2% – from enjoying sterling’s sharp decline against the euro.

It’s safe to say the Eurozone indices are not best pleased with the euro’s recent comeback. The currency is looking pretty buff this Tuesday, surging 0.7% against the pound and 0.8% against the dollar thanks to a mixture of strong GDP and ZEW economic sentiment readings, and the various issues plaguing its rivals. This meant that the DAX shed another 80 points, leaving the German bourse at a fresh near 3 week nadir. The CAC, meanwhile, lost 0.6%, with the Spanish IBEX dropping under 10000 following a 0.8% decline.

UK households unable to save for emergencies, MPs told

Angela Monaghan

Falling real pay, higher housing costs, and cuts to benefits are limiting the ability of UK households to save money for emergencies and retirement, MPs on the Treasury Select Committee have been told.

In the first session of the committee’s inquiry into household finances, Torsten Bell, director of the Resolution Foundation, said family budgets were being constrained as wages in real terms are £15 a week lower than they were before the financial crisis.

“In those circumstances - and housing costs have gone up quite a lot during that phase - then obviously people are finding it hard to save,” Bell said.

He added that many low to middle income families say that while they’d like to save £10 or more a month, they cannot afford to do so.

Wall Street opens lower

US markets are heading lower in early trading, on continuing concerns about the Republican tax plans. Investors are also worried that further interest rate rises - with another expected next month - could harm the economic recovery.

Weaker than expected Chinese data overnight also added to the downbeat mood.

The Dow Jones Industrial Average is currently down52 points or 0.22% while the S&P 500 and Nasdaq Composite both opened 0.35% lower.

US producer prices rise by more than expected

Over in the US, and producer prices climbed by more than expected in October.

The month on month figure rose by 0.4%, the same figure as in September but higher than the forecast 0.1%. On a yearly basis, prices were up 2.8% compared to expectations of a 2.4% rise and a 2.6% increase in September.

The figures add more weight to the idea of another rate rise by the Federal Reserve in December.